Oil prices rose on Monday, recovering from losses at the end of last week. Investors were focused on the tight global supply outlook and a last-minute deal that avoided a U.S. government shutdown, which restored risk appetite.
Brent December crude futures increased by 0.5% to $92.69 a barrel, after falling 90 cents on Friday. Brent November futures settled at $95.31 a barrel on Friday.
U.S. West Texas Intermediate crude futures gained 0.6% to $91.34 a barrel, after losing 92 cents on Friday.
Both benchmarks saw a 30% rally in the third quarter due to forecasts of a crude supply deficit in the fourth quarter. This was driven by Saudi Arabia and Russia extending additional supply cuts.
The Organization of the Petroleum Exporting Countries (OPEC+) is unlikely to change its current oil output policy when the Joint Ministerial Monitoring Committee meets on Wednesday. This is because tighter supplies and rising demand are driving an oil price rally.
According to Hiroyuki Kikukawa, president of NS Trading, the strong start to the week for oil prices is due to supply concerns and the avoidance of a U.S. government shutdown. However, the future rise of the market will depend on demand trends.
While OPEC+ is not expected to change its output policy, Saudi Arabia may start easing its additional voluntary supply cut of 1 million barrels per day. This is due to concerns over Chinese demand, although recent PMI data has provided some confidence with China’s manufacturing PMI returning to expansion territory in September.
China’s factory activity expanded for the first time in six months in September, indicating a stabilizing economy. However, a private-sector survey showed slower expansion in September, delaying a durable recovery in China’s economy.
A last-minute decision by Republican House of Representatives Speaker Kevin McCarthy to turn to Democrats to pass a short-term funding bill pushed the risk of a U.S. government shutdown to mid-November. This means federal workers can expect continued paychecks for now.
The U.S. oil and gas rig count fell to its lowest level since February 2022, amplifying supply fears. Brent is forecasted to average $89.85 a barrel in the fourth quarter and $86.45 in 2024, according to a survey of economists.
Yuka Obayashi reports on Japan’s energy, metals, and other commodities.
